New York City officials are defending their decision to let lead manager Smith Barney, Harris Upham & Co. reinvest the lion's share of proceeds from a recent water authority refunding.

Despite widespread criticism from syndicate members, city officials last week said they negotiated most of the reinvestment transaction with Smith Barney instead of doling out the responsibility through a competitive sale. The purpose of this move, they said, was to help the city obtain a yield match between its reinvestment portfolio and the bonds sold during the deal.

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